Free chlorine is the chlorine that is availiable to dissinfect the water. Combined chlorine is the chlorine that has joined with the ammonia and has formed chloramine. This is what causes the chlorine "smell". This is why you "shock" the water (to remove the Chloramine). Total chlorine minus combined chlorine equals free chlorine. Check out poolsolutions and look for info on "Breakpoint Chlorination".

Free chlorine is the portion of any chlorine you have added to the pool water that is available for disinfection.
Combined chlorine is chlorine that has started disinfecting but has run out of steam. It smells real bad and burns your eyes, but does nothing to keep the water clean.
Total chlorine = free chlorine + combined chlorine.

Free chlorine should be kept at 1 - 3 ppm
Combined chlorine should never exceed half the free chlorine value or 0.5ppm, whichever is the LOWER.
Combined chlorine is unwanted and undesirable; the less you've got the better.